Friday, March 16, 2012

Australia is in the box seat to take advantage of an explosion in Indian demand for coking coal, Reserve Bank research suggests.

The Bank’s assessment of India’s steel industry came as JP Morgan Chase spoke of a “hard landing” in China and said it had already started.

The research by Markus Hyvonen and Sean Langcake from the Reserve Bank’s economic group finds that India is now the world’s forth-largest steel producer, after having been 10th-largest as recently as 1995. But it says relative to the size of India’s economy its steel consumption remains low.

India has large reserves of relatively high-quality iron ore and is likely to be able to feed its growing steel industry without any need for imports. importing iron. But its reserves of coking coal reserves are “quite small and tend to be of low quality, needing to be blended with higher-grade imported coal”.

India is now the third-largest importer of coking coal and has become the second most important destination for Australian coking coal behind Japan...
Although India’s national steel policy had identified the need to further develop non-coking coal methods of production such as electric arc furnaces, its existing capacity meant coking coal was likely to continue to play a role in the development of the local steel industry and “drive further demand for Australian coking coal in the future”.

China would be demanding less Australian cola because it was already in a “hard landing” JPMorgan Chase & Co.’s chief Asian strategist Adrian Mowat said yesterday.

“If you look at the Chinese data, you should stop debating about a hard landing,” he told a Singapore conference. “Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.”

Chinese premier Wen Jiabao said this week home prices are still far from reasonable levels. His comments fueled concerns the government would maintain restrictions on the property market even if they threatened to slow economic growth.

“One should be concerned about what’s happening in the China property market,” Mr Mowat told the Singapore conference. “People are too complacent.”

Yale University professor Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia, said concerns about a hard landing were “vastly overblown.”

“I don’t think the banking system will collapse and the property bubble will burst,” he told a conference in Shanghai. “These are all exaggerations.”

She moved a motion calling on the government to require the Bureau of Resources and Energy Economics to review its modelling “based on the current geopolitics of coal”. It was defeated along party lines.